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China’s Zhejiang Plans Punitive Power Prices to Curb Demand

China will impose punitive power prices on businesses that exceed consumption limits in Zhejiang province, a manufacturing hub bordering Shanghai, to curb demand during an expected electricity supply shortfall this summer.

The provincial government has set power consumption limits on 44 industries including electricity generation, cement and dyeing businesses, according to a statement on its website yesterday, which didn’t give a full list.

China faces the worst power shortage in seven years as the economy grows faster than forecast and some utilities cut production or shut, hit by rising coal prices and government caps on tariffs. Zhejiang, on the eastern coast to the south of Shanghai, is host to companies including automaker Zhejiang Geely Holding Group Co., owner of Volvo Cars.

“We don’t think it will be much of a problem for us given that our factories are in Taizhou and Ningbo, where the power shortage hasn’t been as serious as that in bigger cities like Hangzhou,” Zhang Xiaodong, a spokesman at Zhejiang Geely, said by telephone today.

Zhejiang will monitor more than 2,400 businesses and charge an additional 0.10 yuan (1.5 cents) to 0.30 yuan per kilowatt-hour on power consumption above set limits, according to the statement from the provincial government. The ruling comes into effect on June 1.

The province’s 35.4-gigawatt generation capacity is 3.5 gigawatts short of what it needs during peak summer demand, the local government said.

Power Stations

Solar cell maker Zhejiang Sunflower Light Energy Science & Technology Co., machinery producer Zhejiang Jinggong Science & Technology Co. and magnet-material manufacturer Hengdian Group DMEGC Magnetics Co. are also based in Zhejiang.

About 20 provinces and regions started rationing electricity this month, the official Xinhua News Agency reported on May 3. China may face a summer shortage of 30 gigawatts, the China Electricity Council said on April 29.

Some coal-fired power stations in provinces such as Gansu, Hubei, Hunan, Shanxi and Shaanxi have closed because of rising fuel costs, causing the worst electricity deficit since 2004, according to Xinhua.

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